Regulatory Status
Peter Thiel, the founder of PayPal, has stated that PayPal is not a bank because it does not engage in fractional-reserve banking. Rather, PayPal's funds that have not been disbursed are kept in commercial interest-bearing checking accounts.
In the United States, PayPal is licensed as a money transmitter on a state-by-state basis. PayPal is not classified as a bank in the United States, though the company is subject to some of the rules and regulations governing the financial industry including Regulation E consumer protections and the USA PATRIOT Act.
In 2007, PayPal Europe was granted a Luxembourg banking license, which, under European Union law, allows it to conduct banking business throughout the EU. It is therefore regulated as a bank by Luxembourg's banking supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF).
In Australia, PayPal is licensed as an Authorised Deposit-taking Institution (ADI) and is thus subject to Australian banking laws and regulations.
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“The censorship method ... is that of handing the job over to some frail and erring mortal man, and making him omnipotent on the assumption that his official status will make him infallible and omniscient.”
—George Bernard Shaw (1856–1950)